Equipment Type

The Construction Recovery’s Landmines

June 28, 2011

Rod Sutton is editorial director of Construction Equipment magazine. He is in charge of editorial strategy and writes a monthly column for the magazine, The Sutton Report. He has more than 30 years in construction journalism, and has been with Construction Equipment since 2001.

Has the funding situation in your state gotten worse or better since the start of 2011?

 

Our nation’s No. 1 problem is budgetary. Although Washington is rightfully in the spotlight, the beam has broadened to include states, counties and municipalities. I’ve seen startling projections of how municipality pensions are consuming budgets. Recently, the Wall Street Journal highlighted these stats on pensions’ portion of budgets: Anaheim, Calif., 22 percent; Providence, R.I., 50 percent. (Link may require registration.)

As an industry, we continue to press for a federal transportation bill that supports infrastructure construction and rehabilitation. Excellent transportation systems enable interstate commerce,  promote economic growth, create jobs, keep the traveling public safe. No argument, and let’s keep the pressure on.

Yet there are two landmines to a construction recovery based solely on a Federal transportation bill, as important as that is. First, every Federal dollar must be matched by some level of state spending. Cash-strapped states unable to pony up their share cannot use the Federal money to fix local transportation problems.

Second, construction at the state and local level is a different animal than at the Federal. State and municipality budget battles are closer to home. Now we’re pitting potholes on Main St. against teacher-to-student ratios in the neighborhood elementary school. Plus, the school district is competing against City Hall for its share of the local tax pie.

Local sentiment does more to fuel national moods than high-profile meetings in the Beltway. Local companies know what it means to balance a budget, to match projections to investment, to evaluate current risk against future benefit. On the construction side, the outlook continues muted.

Construction Equipment partnered with our sibling publication, Roads & Bridges, to gauge our readers’ mid-year take on their businesses and economic circumstances. They’re not optimistic for the remainder of 2011, and, truthfully, they’re probably reflecting our own lack of confidence in governments (big and small) to figure out how to balance their budgets.

The table above shows our combined audience’s answer to this question: "Has the funding situation in your state gotten worse or better since the start of 2011?" More than half report that state financials are worse than they were in January. This translates directly to their business outlook. About half expect the second half of the year to remain flat, and 15 percent say it will be worse. Overall, 50 percent expect 2011 to rate either “mediocre” or “poor” as a business year.

We need to keep applying political pressure. At the Federal level, support the groups that support transportation funding. But the more crucial battles, and those that can be directly affected by local action, are those over local and state funds. Call for balanced budgets, encourage elected officials to look at their budgets the way individuals look at our household budgets. Cut up the credit cards and spend only what you take in.

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